AllianceBlock CEO: Trustless KYC and cross-border rules will open DeFi to banks

Ashton Addison: For viewers who missed our first interview, what is AllianceBlock and what are you building?▶ 00:20

Rachid Ajaja: Our objective is to build a new generation of financial infrastructure that combines the high standards of traditional finance with the innovative technology of decentralized finance. We believe the two worlds can't stay siloed and will merge in the near future, and we want to be an actor in that. AllianceBlock rests on three pillars: regulatory compliance, data, and the application layer, which is DeFi. Regulations are coming, and if we want traditional finance to adopt DeFi, we need compliance. That is our value proposition. We want to replace the current financial infrastructure with something less costly, with fewer middlemen, and more inclusive, participative, transparent and fair.

Ashton: Where does AllianceBlock stand now in terms of applications and growth?▶ 01:43

Rachid: One of the first products we released was liquidity mining. Liquidity is one of the biggest challenges for every crypto project, and in traditional finance too. Through liquidity mining we reached around $50 million in total value locked, with more than 30 million ALBT locked, which shows how much our community believes in what we are doing. Most projects, especially ones that have just done their IDO or launched a token, need this, so we built liquidity mining as a service. With zero code, a project can deploy a platform to run liquidity mining across different blockchains, stake, and access analytics. It's a one-stop shop for DeFi, so teams can focus on their product. We already have several clients and are speaking with more projects. The second product is the bridge. There are many bridges, but they rely on centralized relays and we have seen the hacks. Working with Hedera Hashgraph and using Hedera's consortium services, we built a fully decentralized bridge. It supports EVM-compatible chains, including Ethereum, BSC, Avalanche and Polygon, and we will also support non-EVM chains. Arbitrum, a layer 2, is coming. We are working on bridging NFTs and later messaging, and we released a fully open-source SDK. We are also almost finished with our decentralized exchange. It has a new automated market maker that minimizes impermanent loss by more than 50%. It goes to testnet very soon, and we are on the second iteration of audits.

Ashton: How does the AllianceBlock token fit into the ecosystem, and does it make the platform sustainable?▶ 07:44

Rachid: The token is at the center of every product we build. Every transaction on the bridge, AllianceBridge.io, uses ALBT. If the token price goes up, we can lower the fees, because the objective is for fees to stay very low. With liquidity mining as a service, every project must have a pool pairing ALBT with its own token. That is a tight partnership and gives more utility to the project's token too. As more projects join there will be transaction and subscription fees, also paid in ALBT. With trustless KYC, people who need to verify their data will use ALBT. Later, our data node will be based on deposits, so people will stake ALBT to run the network and earn rewards. P2P funding will also charge transaction fees in ALBT. Once all these products work together, ALBT is the fuel of the network, and that gives it real utility.

Ashton: How do you handle compliance across different jurisdictions so your products are available worldwide?▶ 10:12

Rachid: Compliance and regulation are now one of the biggest barriers when we speak with financial institutions. Banks can't participate in or sell products built on protocols like Uniswap, because they don't know who is participating. That raises the probability of money laundering, and they have to justify their activity to the regulator. We have two products to bridge the two worlds. The first is trustless KYC. Our partner is one of the biggest KYC/AML providers in the world and works with the biggest investment banks. Instead of users repeating KYC with multiple providers and risking leaks, we give them control of their data. It is fully encrypted, and once verified they can give or revoke access to banks, projects and launchpads. They can also monetize it: half of what a project would pay a KYC provider goes to the user. Users who don't want to share their data can simply not participate. The second is cross-border rules. We are starting with about ten jurisdictions: Switzerland, the Netherlands, Singapore, the UAE, the Philippines, Liechtenstein, Germany, France, the UK and the United States. The aim is to define rules for lending, investment, tokenized shares and digital assets, so anyone can know what they can do in their jurisdiction. Put trustless KYC and those rules on top of our decentralized exchange and you get a compliant DEX where private banks and wealth managers can provide liquidity and earn trading fees. For this to work, DeFi needs strict compliance, high security standards and transparency. Most hacks aren't caused by the technology or the blockchain. They come from operational errors, such as auditing one contract and then deploying something else.

Ashton: Can traditional finance survive without DeFi, and what do banks need to do?▶ 16:16

Rachid: Investment banks know about DeFi but can't participate because of the barriers, and because it's slow. So they invest in DeFi or partner with DeFi projects. Retail banks are struggling against neobanks and losing a lot of customers, so they have to innovate and find ways to cut costs. Traditional finance will have a huge competitive advantage if it leverages DeFi.

Ashton: Things are moving quickly at AllianceBlock. How has the company grown?▶ 17:18

Rachid: Things are moving super fast. We have grown our team from three to 80 people. On 17 September we held an event with community members, staff and contractors from around the world, and it was amazing to see people from different backgrounds and teams connecting. We are very proud of what has been achieved, but this is just the beginning. We will be happy once all our products are used not only by retail and the crypto space but also by traditional finance.